The “One Big Beautiful Bill Act,” signed into law by President Donald Trump on July 4, 2025, brings major changes to taxes starting in 2026. This bill keeps many of the 2017 Tax Cuts and Jobs Act (TCJA) benefits and adds new deductions to help Americans save money. From tax breaks for tips to increased child credits, this article explains the key changes in simple terms, including who qualifies, how much you can save, and how to claim these benefits.
What is the Trump 2025 Tax Bill?
The Trump 2025 Tax Bill, officially called the One Big Beautiful Bill Act, is a major update to U.S. tax laws. It makes the 2017 tax cuts permanent and introduces new deductions for workers, families, and seniors. Signed on July 4, 2025, after passing the House and Senate, the bill aims to lower taxes for many Americans while boosting economic growth. It also includes changes like higher standard deductions and cuts to some social programs, which may affect low-income households.
Key Tax Deductions in the 2025 Bill
The bill offers new and updated deductions to reduce your taxable income. Here’s a breakdown of the main changes:
New and Updated Deductions
- Standard Deduction Increase: The standard deduction, which most Americans (about 90%) use, rises to $15,750 for single filers, $31,500 for married couples filing jointly, and $23,625 for heads of household in 2025. These amounts adjust for inflation yearly.
- SALT Deduction Cap: The state and local tax (SALT) deduction cap jumps from $10,000 to $40,000 starting in 2025, helping homeowners in high-tax states like New York and California. It phases out for incomes over $500,000 and reverts to $10,000 in 2030.
- Tip Income Deduction: Workers in tip-heavy jobs, like servers or bartenders, can deduct up to $25,000 in tips from their income. This starts in 2026 and phases out for incomes over $150,000 ($300,000 for joint filers).
- Overtime Pay Deduction: Employees earning overtime can deduct the extra “half” pay in “time-and-a-half” up to $12,500 annually ($25,000 for joint filers). This also phases out for high earners.
- Senior Deduction: Americans 65 and older get an extra $6,000 deduction ($12,000 for couples), but it phases out for incomes above $75,000 ($150,000 for joint filers). This is temporary through 2028.
- Child Tax Credit: The credit increases to $2,200 per child (from $2,000), with $1,700 refundable, and is now permanent. It phases out for incomes over $200,000 ($400,000 for joint filers).
- Car Loan Interest Deduction: You can deduct up to $10,000 in interest on loans for American-made cars, benefiting new car buyers.
- Charitable Contribution Deduction: Non-itemizers can deduct up to $1,000 (singles) or $2,000 (couples) for donations to qualifying charities through 2028.
Deduction Summary Table
| Deduction Type | Maximum Amount | Who Qualifies | Phase-Out Income |
|---|---|---|---|
| Standard Deduction | $15,750 (single), $31,500 (joint) | Most taxpayers | None |
| SALT Deduction | $40,000 | Itemizers in high-tax states | $500,000 |
| Tip Income Deduction | $25,000 | Tip-earning workers | $150,000 (single), $300,000 (joint) |
| Overtime Pay Deduction | $12,500 (single), $25,000 (joint) | Overtime workers | $150,000 (single), $300,000 (joint) |
| Senior Deduction | $6,000 (single), $12,000 (joint) | Age 65+ | $75,000 (single), $150,000 (joint) |
| Child Tax Credit | $2,200 per child | Families with kids under 17 | $200,000 (single), $400,000 (joint) |
| Car Loan Interest | $10,000 | Buyers of American-made cars | None |
| Charitable Contribution | $1,000 (single), $2,000 (joint) | Non-itemizing donors | None |
When Do These Changes Take Effect?
Most deductions apply to tax returns filed in 2026 for the 2025 tax year and are temporary, expiring in 2028 unless extended. The SALT cap increase lasts through 2029, and the child tax credit and standard deduction hikes are permanent. The IRS will release a list of eligible tip-earning jobs by October 2, 2025, along with employer reporting rules.
How to Claim These Deductions
To take advantage of these deductions, follow these steps:
Steps to Claim Deductions
- File Your Taxes: Use tax software or a professional to file your 2025 taxes in 2026. Ensure you claim the standard deduction or itemize if eligible.
- Track Eligible Expenses: Keep records of tips, overtime pay, car loan interest, and charitable donations. For donations over $250, get a receipt from the charity.
- Check Income Limits: Verify your income doesn’t exceed phase-out thresholds for deductions like tips, overtime, or senior benefits.
- Use My Social Security Account: Check your earnings record at www.ssa.gov/myaccount to ensure accuracy, as it affects your tax calculations.
- Consult a Tax Professional: For complex situations, like SALT or senior deductions, a tax advisor can maximize your savings.
Tips to Maximize Your Tax Savings
- Delay Large Deductions: If possible, time your charitable donations or car purchases for 2025 to claim new deductions.
- Keep Detailed Records: Save receipts for tips, overtime, and donations to prove eligibility during tax season.
- Check SALT Benefits: If you live in a high-tax state, itemize deductions to benefit from the $40,000 SALT cap.
- Plan for Phase-Outs: If your income is near the phase-out limits, consult a tax professional to optimize your deductions.
Why the 2025 Tax Bill Matters
The Trump 2025 Tax Bill offers significant savings for workers, families, and seniors, with an average tax cut of $2,900 per household. However, cuts to programs like Medicaid and food stamps may impact low-income families, and the bill is expected to add $3.8 trillion to the federal deficit by 2034. Understanding these changes helps you plan your finances and take full advantage of new tax breaks.
Conclusion
The Trump 2025 Tax Bill brings exciting tax relief for millions of Americans, with new deductions for tips, overtime, car loans, and seniors, plus a higher child tax credit and SALT cap. By filing accurately, keeping records, and understanding income limits, you can maximize your savings in 2026. Stay informed through the IRS website (www.irs.gov) or consult a tax professional to make the most of these changes. Despite benefits, be aware of potential impacts from social program cuts and plan accordingly for a financially secure future.
Frequently Asked Questions (FAQ)
What is the Trump 2025 Tax Bill?
It’s a new law signed on July 4, 2025, that extends 2017 tax cuts and adds deductions for tips, overtime, seniors, and more.
Who qualifies for the new tip deduction?
Workers in tip-heavy jobs, like servers, can deduct up to $25,000 in tips if their income is below $150,000 ($300,000 for couples).
How much is the child tax credit in 2025?
It’s $2,200 per child, with $1,700 refundable, for families earning under $200,000 ($400,000 for joint filers).
When do the new deductions start?
Most apply to taxes filed in 2026 for the 2025 tax year and expire in 2028, except for the child tax credit and standard deduction, which are permanent.
How do I claim the charitable deduction if I don’t itemize?
Non-itemizers can deduct up to $1,000 (singles) or $2,000 (couples) for donations to qualifying charities with proper receipts.
Will the bill affect my taxes if I’m low-income?
You may see smaller tax cuts (about $150 on average), and cuts to Medicaid or food stamps could reduce your overall income.